In its macro economy perspective report, the Chamber of Mines of Zimbabwe sees a deceleration of inflation after inflationary pressures eased in the second half of the year.
“Inflation pressures, which had picked up considerable pace during the first half of 2010, have subsided, with annual headline inflation decelerating from 5,3% in June to 4,1% in July 2010,” the Chamber of Mines said: “The annual headline inflation is forecast at about 4% through December 2010.”
In July, inflation stood at 4,1%, while in August it dropped to about 3.6% and then in September it picked up by about 0,6% making it 4,2%.
The Chamber of Mines said the strengthening of the South African rand against the US dollar, productivity and capacity utilisation, borrowing costs, international food and oil prices and other exogenous factors would determine the inflation trend for the rest of the year.
“The strengthening of the rand against the US dollar exerts upward price pressures on prices in Zimbabwe and a weaker rand exerts downwards price pressures through a buildup of price pressures in South Africa which is Zimbabwe’s largest trading partner,” the chamber said.
“A combination of enhanced productivity, higher capacity utilisation and retaining zero duty on food imports implies containment of inflation pressures, while high domestic costs of borrowing, utilities and food prices, exert upward pressures on domestic prices.”
Meanwhile economic growth is said to be growing with fiscal revenue collections now at US$143 million per month and the growth of individual and corporate taxes is picking up, albeit unevenly across sectors of the economy.
Growth is estimated at 6,3% in 2010, on the back of mining and agriculture performance with mining growth projected at 35.3% and agriculture projected at 18% in 2010.
The economy emerged from the deflation that immediately accompanied the official introduction of the multicurrency in February 2009.The annual rate was -7.8% in December 2009, reflecting the pronounced deflation that occurred at the beginning of 2009.
During the first quarter of 2010, month on month inflation averaged 0,9%, and by March the year on year inflation was 3,5%, effectively ending deflation.